NRI Papers
No. 189 October 1, 2013
  Issues Related to the Negotiation and Establishment of Joint Ventures with Indian Companies  
Wataru KADOBAYASHI, Yohei TEZUKA, Minoru AOSHIMA and Amit KUMAR

Japanese companies intending to do business in India have several options for entering the market including (1) independent entry (sole proprietorship), (2) merger and acquisition (M&A) and (3) establishment of a joint venture. For Japanese companies with little experience in the Indian market, establishing a joint venture with an Indian company is often a very sensible strategy.

When evaluating and selecting Indian companies as candidate joint venture partners, it is important to evaluate them from the aspects of both business/corporate functions and corporate culture. This should be done by considering the basic advantages and disadvantages that will be brought about by a relationship in the value chain between the Japanese company and the Indian partner company as well as the business environment unique to India.

Given that the partner company is likely to have expectations that are different from those of the Japanese company in taking part in the joint venture and that a joint venture is not always a permanent arrangement, it is necessary to determine the details of various matters as far as possible prior to the establishment of any joint venture so that the commitment (degree of involvement) that is optimum to each party can be obtained and the Japanese company can proceed in an advantageous way even in complicated situations that might occur in the future. The issues that are particularly important in doing so include: (1) which party holds the right of management, (2) defining business areas, (3) reaching agreement on various functions related to business and corporate management and (4) decision-making methods in the event of any disagreement between parties.

To prevent the occurrence of situations in which making decisions for day-to-day operations and other various matters is left up to the partner company, resulting in an unmanageable status, careful consideration must be given to the management of the joint venture.

Contents
I Positioning of Joint Ventures as Part of an Entry Strategy into India
II Evaluation Criteria for Partner Selection
III Main Issues Related to a Joint Venture Scheme
IV Management Considerations Specific to Joint Ventures
V Items to Consider in Entering into Joint Venture Negotiations

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